Financial statements for Marcell Company appear below: Marcell Company Statement

Question

Financial statements for Marcell Company appear below: Marcell Company Statement of Financial Position December 31, Year 2 and Year 1 (dollars in thousands) Year 2 Year 1 Current assets: Cash and marketable securities $240 $230 Accounts receivable, net 190 190 Inventory 420 420 Prepaid expenses 100 100 Total current assets 950 940 Noncurrent assets: Plant & equipment, net 2,340 2,320 Total assets $3,290 $3,260 Current liabilities: Accounts payable $190 $230 Accured liabilities 60 60 Notes payable, short term 360 450 Total current liabilities 610 740 Noncurrent liabilities: Bonds payable 640 660 Total liabilities $1,250 $1,400 Stockholders' equity: Preferred stock, $10 par, 8% 260 260 Common stock, $5 par 300 300 Additional paid-in capital--common stock 520 520 Retained earnings 960 780 Total stockholders equity 2,040 1,860 Total liabilites & stockholders equity $3,290 $3,260 Marcell Company Income Statement For the Year Ended December 31, Year 2 (dollars in thousands) Sales (all on account) $7,750 Cost of goods sold 5,430 Gross margin 2,320 Selling and administrative expense 910 Net operating income 1,410 Interest expense 130 Net income before taxes 1,280 Income taxes (30%) 384 Net income $896 Marcell Company's current ratio at the end of Year 2 was closest to: 1.56 1.16 0.85 1.40

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Explanation / Answer

Current Ratio = = Total Current Assets/Total Current Liabilities = 950/610 = 1.56

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